Legislators Review Lottery Budget For Coming Fiscal Year

LITTLE ROCK — The state lottery director Tuesday presented to legislators a proposed budget for the lottery that projects $98 million in net proceeds for college scholarships in the fiscal year that starts July 1.

Lottery Director Bishop Woosley also told the Arkansas Lottery Commission Legislative Oversight Committee he expects the lottery to end the current fiscal year with about $8 million less in profits than his predecessor, Ernie Passailaigue, had projected. Woosley called Passailaigue’s estimate “excessive.”

Passailaigue had projected that the lottery would collect $102.9 million for scholarships in the fiscal year that ends June 30. Woosley told legislators the lottery’s profits for the year stand at $88.4 million, and he hopes to end the year with about $95 million.

Passailaigue resigned in October. Late last year, then-Acting Director Julie Baldridge revised the projected lottery profits for the year to $89 million.

“We’re going to surpass that goal,” Woosley told legislators. “I think the (original) expectation last year was a little bit excessive in my mind, and we’re trying to be reasonable and cautious in our projections.”

Woosley said the budget for fiscal 2013 was prepared before he recently renegotiated the terms of the lottery’s contract with its vendor for scratch-off tickets, Scientific Games. The company has agreed to lower its payment rate from 1.92 percent of scratch-off ticket sales to 1.81 percent, which Woosley said will mean an additional $430,000 in annual profits for the lottery if sales remain constant.

Scientific Games also agreed to give the lottery a $2 million incentive payment and advance $200,000 in credit toward the future purchase of merchandise.

The lottery’s net proceeds have ranged between 20 and 20.5 percent of ticket sales. Rep. Randy Stewart, D-Kirby, asked Woosley if he expected that profit margin to increase.

“We certainly hope so,” Woosley said.

Woosley appeared before the legislative panel about a month after the state Lottery Commission voted to authorize him to tell legislators the lottery wanted authority to designate employees as law officers for the purpose of conducting criminal investigations. Woosley did not mention police powers in his presentation Tuesday, however, telling reporters later the idea has been dropped.

Gov. Mike Beebe told the Arkansas News Bureau last month he was not inclined to support police powers for the lottery. Some lawmakers have also expressed reservations.

“I think there’s just not at this point an appetite for it,” Woosley said.

Legislators also heard a report from Shane Broadway, interim director of the state Department of Higher Education. Broadway said that as of this morning, 12,991 graduating high school seniors had accepted lottery-funded scholarships for the next school year, or about 6 percent more than the 12,202 graduating seniors who accepted the scholarships last year.

The Academic Challenge Scholarship program receives $20 million a year from general revenue, plus all lottery proceeds after prizes and expenses.

Broadway said the department was still processing applications and expected to see about 1,600 more students accept awards.

The department has not yet offered awards to any of the 14,625 non-traditional students who applied for the scholarships.

The first lottery-funded scholarships were awarded in the 2010-11 school year. Broadway said the department awarded $122.7 million in Academic Challenge Scholarships that year and $129 million in the just-finished school year.

The lottery launched in September 2009. Sen. Johnny Key, R-Mountain Home, co-chairman of the oversight committee, noted that annual scholarship awards have exceeded the lottery’s annual income, which was $107 million in its first nine months and $94 million in fiscal 2011.

‘That’s something that doesn’t need to be ignored or forgotten, how important that first nine months of sales and the reserve has been to keeping these numbers up,” Key said.